STAFF NEWS & ANALYSIS
Solution to Economic Crisis – Pretty Wallpaper?
By Staff News & Analysis - March 06, 2010

A full-frontal facade to please everyone Alexander Potemkin's spirit is alive and well in Whitley Bay. … The face of the nation has yet to recover from the recession: on our high streets, the vacant stores stare gloomily back, gaps in a mouth full of rotting teeth. But it's not just the vacancies that are such a depressant for the high-street shopper: it's the shops that are still going. Now, one local authority has come up with an idea that, with some elaboration, could solve all our problems. Tired of having the appearance of its town centres marred by empty, shabby, disintegrating retail outlets, North Tyneside council has hit upon the ingenious notion of dressing them up, presenting them as they would look at a time of bountiful prosperity. The result is a sumptuous "Delicatessen" window treatment pasted over a derelict shop on the main street – creating, in effect, a Geordie version of the Potemkin village. Modern historians are generally cautious about these matters. One leading sceptic is Simon Sebag Montefiore, the acclaimed biographer of the Russian statesman. While he accepts that Alexander Potemkin may have choreographed a few peasants to look fetching while Catherine the Great passed by, he dismisses the long-held notion that entire fake communities were got up and dismantled like stage sets. Spoilsport. But it doesn't matter, because we now know that Potemkin's spirit is alive and well, and living – unlikely though it may sound – in Whitley Bay. And very charming it looks, too. There was a slightly tragic shot of a few hopeful customers, noses wistfully pressed against the delicatessen window – as perhaps a Crimean peasant may once have gazed longingly at a warm fire in Potemkin's time – but, on the whole, the initiative has been declared a success. At least Whitley Bay isn't as bloomin' miserable as nearly every other high street in the country. – UK Telegraph

Dominant Social Theme: If you can't gin up the economy, spruce it up?

Free-Market Analysis: This article excerpt above is a perfect metaphor for what is happening in Great Britain. Britain's educational system, health care system, media (state-run BBC) and economic system are dysfunctional to one degree or another. The country, according to its mainstream press, is teetering on the verge of bankruptcy and yet the spending continues. The central bank has screwed rates down as low as they can go, flooding the country with cheap money but the economy remains stubborn moribund, as one can see from the above-excerpted article.

The solution, obviously, is to put false facades on empty commercial real estate in order to create the pretense of prosperity where none exists. We would anticipate that this solution would find favor in various states of Europe and also in a goodly swath of America. But the West has virtually ceased to deliver wealth or security to its inhabitants and substituting murals for the real thing won't make any difference in the long run.

Which brings us to a larger point. Yesterday we examined a comment by Sir Stuart Rose, the head of the posh UK department store, Marks & Spencer. According to the Telegraph article on the matter, "Sir Stuart warned that the whole concept of 'business' has become demonised as a result of public mistrust in wealth creation. When mega-bonuses are being paid to bankers at taxpayer-owned financial institutions, these feelings of hostility are perhaps understandable. However the retail chief warned that such attitudes are extremely dangerous because capitalism has been the one proven progressive force around the world for centuries. History has shown that communism does not work, he said. We trash capitalism at our peril."

We used the comment as a jumping off point to write about how uninspiring the phrase capitalism is in terms of describing the free-market (or free-enterprise) system. We wrote the following:

Surely (one day) the Internet revolution – which has brought free-market thinking to millions – will contribute a name more evocative than "capitalism" to describe the free-market. In fact, the label that Rose is looking for is not capitalism – which puts the emphasis on money – but human action (a Misesian term) that puts the emphasis on people. Human action, unfortunately, is not yet so popular a term as capitalism. It might confuse the audience, which is one reason not to use it in a popular argument. … It is sad (from our point of view) that we still seem to lack the short-hand vocabulary necessary to describe the richness and generosity inherent in free-market thinking. … One day, perhaps, a vocabulary will arise that will, in abbreviated form, purvey the consolidated wisdom of Misesian human action and the spiritual generosity of the Sermon on the Mount.

What we didn't comment upon, of course, was the accuracy of Sir Stuart Rose's statement itself. Even taking his points at face value, Britain does not have "capitalist" or free-market system in place and hasn't for a long time. It has, in fact, a "mixed" system that is increasingly authoritarian and is becoming more moribund and dysfunctional every day. It is a system that is similar in spirit to the one that is being implemented in the United States as well.

The hallmarks of these systems – whether you want to call them fascist, socialist or authoritarian – are a highly graduated and punitive income tax for even moderately successful people, a hyper-aggressive central bank over-issuing fiat money year in and year out until it dwindles into worthlessness, an economy so regulated and criminalized that it is nearly impossible to do business without contravening some rule or law, a sociopolitical environment that is increasingly militarized and focused on domestic discipline and imprisonment and a ruling elite that is ever-more disengaged from the hoi-polloi it seeks to "govern."

So … what Rose calls "capitalism" we call nascent despotism. Authoritarian societies – and that is what Britain has virtually become and where America is headed – usually end the same way. They spiral downwards into Cuban or Venezuelan-style dysfunction and then, when the society is absolutely polarized and ruined, there is some sort of upheaval or popular rebellion and a new dysfunctional regime is introduced. But history shows us that such ruined societies rarely recover the freedoms that have been lost or a full gamut of free-market opportunities.

We can see the process at work throughout the Western world. As the pillars of the authoritarian state are put into place one at a time, the population is increasingly polarized. The middle class is squeezed into near extinction as poverty grows. The result is two distinct populations. The first, tiny group operates the levers of the state, the banks, the stock exchanges, the governmental authorities that mimic the marketplace without delivering its egalitarian and merciful benefits. The second (huge) pool of people literally scrape by paycheck to paycheck, regardless of whether they have public or private occupations. This is in fact the South American model and well on its way to becoming the model du jour in Europe, Britain and eventually America.

Of course, having made the above statements, it is important to note that we are hopeful – not despairing – about the state of the world. The above evolution of social dysfunction is usually implemented in stages through a kind of propaganda – through elite promotions that inspire fear and concentrate wealth and power in fewer and fewer hands. But increasingly, the Internet has exposed these promotions, virtually blown them up throughout the West and especially in America, and accomplished this feat in a very short period of time. The dominant social themes of the elite are crumbling even as we write. That does not mean they will cease to be entirely effective or that the power elite that promotes these themes will simply cease to exist. But it does mean that the main mechanisms of despotism are under attack as they have not been for several centuries.

After Thoughts

We use the historical model of the Gutenberg press to ascertain where Western society might be headed. That model shows us that once the "messaging" of the elite is exposed, the ability to leverage social control erodes. The result may then be (as history suggests) the implementation of military conflict and other more malevolent mechanisms including domestic repression aimed at harassing and distracting an increasingly resentful and disbelieving populace. But in times of extreme technological and communications advances, these strategies may not work so well either.

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